Global Evidence on Economic Preferences

Global Evidence on Economic Preferences

by Armin Falk

People's preferences -- particularly regarding risk, the timing of rewards, reciprocity, altruism and trust -- are important in economics because preferences like these drive people's decisions, and ultimately, economic outcomes.

While a bounty of empirical literature provides insights into individual-level preferences within certain populations, researchers know far less about how these preferences vary worldwide. This is partly because, until recently, no global data set existed that captured these preferences.

In our journal article, "Global Evidence on Economic Preferences," my coauthors and I introduce a data set that captured those preferences, the Global Preferences Survey (GPS). The survey -- collected through the framework of the 2012 Gallup World Poll -- included 12 question items that measure time preference, risk preference, unconditional altruism, positive and negative reciprocity and trust. These questions were posed to 80,000 adults in 76 countries that represent about 90% of the world's population.

The data set is described in detail on the GPS homepage, which also offers an interactive tool to compare preferences across countries, and allows researchers to download the questionnaires and access the data and resources to replicate the results.

The following are a few important findings from our analysis of those data.

Key Findings

People's preferences vary from country to country, but the differences are even larger within countries and these individual characteristics may be even more important. Many of the world's most patient populations -- based on their answers to questions about immediate vs. delayed rewards -- are located in Europe or the English-speaking world, while risk-taking preferences are particularly prevalent in Africa and the Middle East. Prosocial preferences (altruism, reciprocity and trust) are pronounced throughout Asia and relatively weak in sub-Saharan Africa.

At the individual level, people's preferences differ by gender, age and cognitive ability. For example, women are more impatient, less risk-tolerant and more prosocial than men. Cognitive skills and age are linked to all of the risk, time and prosocial preferences. Yet these relationships, to some degree, are country-specific. While the relationships with risk-aversion and gender are in same direction in most countries, the age profile for patience depends on the country's development level.

At the country level, there are links between preferences and biogeographic and cultural variables, such as absolute latitude, the presence of large, domesticable animals and agricultural suitability. Patience, specifically, is strongly positively related to a set of variables previously associated with comparative development, namely Protestantism and measures of individualism.

People's preferences are linked to behaviors and economic outcomes. Within countries, patient individuals are more likely to save and have higher educational attainment, and more risk-tolerant individuals are more likely to be self-employed and smoke. Social preferences are predictive of prosocial behaviors and outcomes, such as donating, volunteering time and providing help to strangers, friends and relatives.

Across countries, preferences vary with outcomes ranging from per capita income to entrepreneurial activities to the frequency of armed conflicts. For example, risk-taking is associated with proxies for entrepreneurial activities, in line with the within-country relationship between risk-taking and self-employment.

Conclusion

The data from this survey allow us to determine, for the first time, that people's preferences vary by country and within-country around the world, and that these differences are linked to both individual-level and aggegrate cultural and biogeographic characteristics. The results also provide evidence that these differences in preferences are relevant to economic outcomes.

However, these findings only scratch the surface of what we are continuing to learn from this global survey. For example, in an article that appeared in Science in late 2018, Johannes Hermle and I used this survey to examine whether the gender differences in preferences are related to the degree in female empowerment across societies. We found that the more women have equal opportunities, the more they differ from men in their preferences.

But a lot of uncharted territory remains. The novel raw correlations we found between country-level profiles and aggregate economic outcomes call for a more detailed analysis of the underlying causes.

Armin Falk is a Professor of Economics at the University of Bonn and Chief Executive Officer of the briq Institute on Behavior & Inequality.

Anke Becker is a Postdoctoral Researcher at Harvard University.

Thomas Dohmen is a Professor of Applied Microeconomics at the University of Bonn and Research Director at the IZA Institute of Labor Economics.

Benjamin Enke is an Assistant Professor of Economics at Harvard University.

David Huffman is a Professor of Economics at the University of Pittsburgh.

Uwe Sunde is a Professor of Economics at the University of Munich.

The freely available Global Preferences Survey data include unique identifiers that make it possible for researchers to re-integrate these data with the full 2012 World Poll data set to support further detailed analysis. The World Poll data set is available for purchase.

A new report from the United Nations on the world's progress on sustainable development goals features data that Gallup collected on behalf of its clients FAO and World Bank on world hunger and financial inclusion.